O.C. Wholesaler Ingram Micro Will Acquire Competing Unit for $78 Million

SANTA ANA —  Computer parts and software wholesaling giant Ingram Micro Inc. got even bigger Wednesday with an agreement to acquire the $3-billion-a-year computer distribution business of Intelligent Electronics Inc.

Ingram Micro, the computer industry’s largest wholesale distributor with $12 billion a year in sales, said it will pay up to $78 million for the Pennsylvania-based company’s Reseller Network division.

The purchase price includes $50 million to $60 million in debt that Ingram Micro will assume when the deal closes, said Jeff Rodek, Ingram Micro president and chief operating officer.

Analysts said the acquisition removes a competitor that had been cutting prices and bolsters Ingram Micro’s already strong position in the fast-growing custom computer market.

The Reseller division distributes computers that it configures to retail customers’ specifications. The custom configuration business is relatively new, but is growing as computer makers move away from the costly business building the various configurations themselves.

The business has relatively low profit margins, so it depends on very high sales volumes, said Steven Baker, an industry analyst with International Data Corp. in Massachusetts.

Ingram Micro has a similar division, Ingram Alliance, that began operating three years ago and last year had $2 billion in sales, Rodek said.

The combined operations, Rodek said, would give Ingram Micro a chance to offer computer resellers more cost-effective supplies and service.

Ingram is likely to shut down Reseller Network division’s Denver headquarters and distribution center immediately after the deal closes, and probably will close its Memphis center in the near future, Rodek said. He said that there will be layoffs but that the total number is not yet known. The division has 1,100 employees.

Ingram Micro has 9,000 employees and operations in 19 countries. While its new acquisition has $3 billion a year in sales, there is no guarantee that Ingram will keep all of the business. Still, Rodek said, the company expects to capture most of it.

Intelligent Electronics had been struggling in the highly competitive computer wholesaling world and sold the Reseller unit to Ingram Micro in order to concentrate on its core business of distributing computers to corporate clients.

As part of the sale agreement, Ingram Micro--which distributes computer parts and software titles from more than 1,000 manufacturers--will become the primary wholesale source for Intelligent Electronic’s business sales unit, XLSource.

Because XLSource had not been a customer in the past, said Rodek, that three-year agreement is worth $600 million a year in new sales to Ingram.

He said the purchase could add to Ingram Micro’s profits this year and definitely will boost profits next year.

The acquisition must be approved by regulators and Intelligent Electronics stockholders. Ingram Micro said it hopes to complete the deal by early summer.

Ingram Micro shares were unchanged at $22.75 on the New York Stock Exchange while Intelligent Electronics shares rose 31.25 cents Wednesday to close at $3 in Nasdaq trading.